Can I issue a winding up petition?

4 August 2017

I am owed thousands of pounds by a customer. What is a winding up petition and what will it cost me?

If you are owed money by a customer then there are a range of actions that you can take in order to recover the debt. Issuing a winding up petition is perhaps the most powerful weapon in any creditor's armoury. You effectively petition the court to issue a winding up order against the company. A hearing date will be set and the debtor informed. However it should only be used as a last resort. There are a number of things to consider if you go down this route.

The debt must be absolutely proven. Any arguments about quality of product, pricing, accounting errors must be ironed out. If the court finds that the debt is not proven then you could end up paying costs and the petition dismissed .Also it can be deemed an "abuse of process".

Have you tried all other means to collect the debt? This does not necessarily mean using all the other remedies ie CCJ, Statutory Demand etc but you have to be seen to have given the debtor plenty of opportunity to pay. By issuing a petition you are, in effect, saying that the company CANNOT pay its debts so it should be wound up ie liquidated and remaining money distributed to the creditors.

You do not have an ulterior motive. I.e you are a competitor and you are simply looking to knock over the company. This is important as even if the company does owe you the money the court does have to look at the position of the other creditors. If the debtor puts forward a proposal to restructure the company and pay a dividend to all the unsecured creditors via a CVA then it has been held that one creditor cannot override the others. The relevant case was:

Re Dollar Land (Feltham) & Ors [1995] BCC 740 reported that the court decided that a winding-up order should be rescinded if there was a real prospect that CVA proposals would be approved by the company's creditors. In other words let the CVA majority decide.

I see what you are saying but I still want to go ahead. How do I go about it?

The first step is to look at the cost of collection. You will need to instruct a solicitor to issue the winding up petition and pay a court filing fee. All this is likely to add up to nearly £2000 so it best reserved for large debts. If you have not instructed a solicitor, then please call us on 08009700539 - we can recommend some to you.

Gather all the necessary evidence to prove the debt.

Decide what your negotiating stance is going to be. The reason for this is that a petition on its own does not do the real damage to the company. It may of course persuade them to pay you so that is a result. However, it is the advertisement of the petition in the London Gazette that does real damage even before the hearing date.

The petition must be advertised no later than 7 days before the hearing date and no earlier than 7 days after service on the registered office. The Companies Court Winding Up List is published every week and shows every scheduled hearing. Please note: all scheduled winding up petition hearings are heard at court even if creditors have been paid in full by the company beforehand. The hearing will simply be heard and dismissed.

Once a petition is advertised the bank will freeze the company's account therefore they will not be able to pay you. Please read our page on winding up petitions to understand why this is done.The debtor may ask you to delay advertising the petition to give them time to pay you or even time to propose a restructuring. They may ask you to accept a partial payment in order to withdraw the petition. Their lawyers may simply be able to ask for an adjournement and the court may well accept. An adjournment can be for up to 90 days.

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Just a quick note to say a big thank you to all the staff at KSA, our CVA was passed today by creditors voting in an overwhelming number including HMRC to accept the proposal as prepared by KSA.

The road to reach today’s conclusion has been bumpy, but at each stage your team has supported and guided us through the issues and we have reached a very satisfactory outcome to the benefit of customers, staff, all creditors and shareholders.